Home Office Deduction Guide

Employee vs Self-Employed

Key Differences

Employee Home Office

Eligibility Requirements

• Required to work from home by employer
• Work from home more than 50% of time, OR
• Use workspace exclusively for work and meet clients regularly
• Employer provides T2200 or T2200S

T2200 Form

• Employer certifies work-from-home requirement
• Indicates what expenses you can claim
• T2200S is simplified short form
• Keep—don't submit with return

Eligible Expenses (Salaried Employees)

• Utilities (heat, electricity, water)
• Internet access fees
• Minor maintenance/supplies
• Home insurance (workspace portion)

Additional for Commission Employees

• Everything salaried can claim PLUS
• Rent
• Property taxes
• Home insurance

Self-Employed Home Office

Eligibility

• Principal place of business, OR
• Used exclusively for business AND meet clients regularly

Eligible Expenses

• Rent (if renting)
• Mortgage interest (not principal)
• Property taxes
• Home insurance
• Utilities (heat, electricity, water)
• Internet
• Maintenance and repairs (reasonable portion)

Cannot Claim

• Mortgage principal
• CCA on home (creates recapture issues)
• Personal portion of expenses

Calculating the Deduction

Business-Use Percentage

• Square footage method: Office sq ft / Total sq ft
• Room method: 1 room / Total rooms (if similar size)
• Apply percentage to eligible expenses

Example Calculation

Home: 1,500 sq ft, Office: 150 sq ft = 10%

Simplified Method (Employees)

Temporary Flat Rate Method

• Originally for COVID—may be extended
• $2 per day worked from home
• Maximum $500 per year
• No receipts or T2200 needed
• No detailed calculation required

When to Use

• Worked from home 50%+ of time
• At least 4 consecutive weeks
• Simple, no tracking required
• Compare to detailed method

Limitations

• Maximum $500 benefit
• May leave money on table if expenses high
• Cannot combine with detailed method

Detailed Method (Employees)

When to Use

• Home office expenses exceed $500
• Have T2200 from employer
• Willing to track and calculate

Process

1. Get T2200/T2200S from employer
2. Calculate workspace percentage
3. Total eligible expenses for year
4. Apply percentage
5. Complete Form T777 or T777S

Documentation

• T2200 or T2200S (keep—don't submit)
• All expense receipts
• Calculation of workspace %
• Keep 6 years

Cannot Create or Increase Loss

The Rule

• Home office expenses limited to business/employment income
• Cannot create loss from these expenses alone
• Unused amounts carry forward

Self-Employed Example

Business income: $1,000, Home office expenses: $3,000

• Can claim: $1,000 (reduces income to $0)
• Carry forward: $2,000 to next year

Special Situations

Part-Year Work From Home

• Prorate expenses for months worked from home
• Track start/end dates
• Simplified method: $2/day actually worked from home

Multiple Jobs

• Can claim for each if requirements met
• Separate T2200 for each employer
• Don't double-count same expenses

Shared Workspace

• Multiple people working from same home
• Split expenses reasonably
• Each person tracks their own time

Common Eligible Expenses

Utilities

• Electricity
• Heat (natural gas, oil, etc.)
• Water
• Business portion deductible

Internet and Phone

• Internet access fees
• Cell phone (business portion)
• Separate business line (100%)

Supplies

• Office supplies (pens, paper, etc.)
• Printer ink, toner
• Minor equipment

What You Cannot Claim

Always Excluded

• Mortgage principal payments
• Furniture (employees)
• Computer equipment (usually—see T2200)
• Capital expenses (employees)
• Home decorating/improvements

CCA Warning (Self-Employed)

• Can claim CCA on home, but shouldn't
• Creates "change in use" issues
• Triggers partial capital gain on sale
• Loses principal residence exemption portion

Record Keeping

What to Track

• Days worked from home
• All expense receipts
• Home measurements (for %)
• T2200 form (employees)

How Long

• 6 years from tax year
• Digital copies acceptable
• Organize by category and year